Services Marketing

CHAPTER 2
INTRODUCTION TO SERVICES MARKETING

2.1 Introduction
The turn of the century has seen profound changes in the global economy. Services
have played a crucial part in these changes, because services are becoming the way
organizations meet with their markets (Irons, 1997:4) Already organizations have
discovered that their survival no longer exclusively depends on the products they
offer, but also on the additional offerings they make to their customers that
differentiate them from their competitors. Innovative organizations, offering new
services as well as unique customer services, are now succeeding in markets where
established organizations have failed (Lovelock and Patterson, 1998:4).

Services marketing is not a self-enclosed task but is integral to service organizations
as a whole and the object of the activity is people, who are reactive, not passive as
compared with a product (Irons, 1997:18). Services marketing concepts, frameworks
and strategies were developed as the result of interlinked the forces of many
industries, organizations, and individuals who have realized the increasingly
important role services are playing in the current world economy. Initially the
development of services marketing focused on service industries. However,

INTERNAL MARKETING IN A SERVICE ORGANIZATION
19
manufacturing and technology industries recognized services as a prerequisite to
compliment their products, in order to compete successfully in the market place.
Therefore it can be argued that, in most industries, providing a service is no longer an
option but a necessity.

Providing a service is a people business. The interaction between customers and
service employees is vital for the actual success of service delivery. Rendering
excellent quality service depends very much on the way service employees behave.
In this regard, service competencies and service inclination contribute towards the
success of services (Kasper, van Helsdingen, de Vries, 1999:513). Customers are
becoming more educated and demand not only quality products but also high levels
of services to accompany them. Service organizations therefore need to adapt to
customers views on services in order to assess whether the services they provide
are perceived by customers as better than those provided by other service providers
(Kasper et al., 1999:139).

The objective of this chapter is to address the issues surrounding services, services
marketing challenges and the human element of service processes. The chapter is
divided into three parts. Part one defines services and discusses the unique
characteristics that differentiate services from goods. These characteristics of
services present service marketers with unique marketing challenges. The second
part investigates the roles that the services marketing triangle and the service mix
play in addressing these challenges. Services are about people and for that reason,

20
part three concentrates on the roles which customers and service employees play in
services.

2.2 Service definition

A wide variety of activities labelled as services are practised by both profit-orientated
organizations and non-profit orientated organizations. The success of these
organizations depends on delivering excellent service quality and creating value to
customers (Kasper et al., 1999:13). Defining services is therefore not a simplistic
task. Over the years service marketing literature has provided readers with an
assortment of service definitions.

According to Irons, (1997:12) pure services are intangible but they do usually add
value to, or make available, a tangible product. They do not result in transfer of
ownership and may leave only memories.

Zeithaml and Bitner (1996) claim that in the simplest terms services are deeds,
processes, and performances. Their broader definition states that services include all
economic activities whose output is not a physical product, is generally consumed at
the time it is produced, and provides added value in forms that are essentially
intangible concerns of the purchaser.

21
Kotler (1996) defines service as an activity that one party offers another that is
essential intangible and does not result in the ownership of anything. Its production
may or may not be tied to a physical product.

Grnroos (1990) identifies a service as an activity or series of activities of a more or
less intangible nature that normally, but not necessarily, takes place in interaction
between the customer and service employees and/or physical resources or goods
and/or systems of the service provider, which are provided as solutions to customer
problems.

The conclusion derived from the above definition is that services deal with intangible
components. The purchase of services does not necessarily result in physical
transfer or ownership but still creates a bundle of benefits during or after the service
interaction or experience.

Distinguishing between the tangible and intangible components of a service is
extremely difficult. Therefore, separating the core service from the augmented
service helps to simplify this task. The core service represents the fundamental
benefits the service provide to satisfy customers needs. The augmented service
incorporates the core service in addition to the tangible elements and all additional
benefits of the service employed to satisfy customers needs. The core services are
mostly intangible because of their lack of physical attributes, while augmented
services provide the customer with the impression of the services tangibility
component, because it can be seen, touched, and transferred to the customer.
22
Mostly the result of the service interaction is a product of a tangible nature (Kasper et
al., 1999:139; Palmer, 1994:127).

The bundle of benefits is the customers expectations from the service. Customers
experience positive consequences of service processes as benefits, while negative
consequences are experienced as perceived risks. The bundle of benefits and the
way the services are delivered is aimed at creating customer satisfaction. In most
service processes, consumption and production of services take place at the same
time. This procedure requires interaction between the service provider and the
customer to complete the service process. The success of the service process is
subsequently dependent on the success of the interaction.

From the above discussion Kasper et al., (1999:13) have constructed a broad
definition of service in which the relevant topics will be recognized: Services are
originally intangible and activities which are relatively quickly perishable activities
whose purchase takes place in an interaction process aimed at creating customer
satisfaction, but this interactive consumption does not always lead to material
possession.
Over time, services and the service sector have been defined in many different ways,
which add to confusion and disagreement when discussing services and service
marketing. For the purpose of this study, the above-mentioned broad definition of
services will apply and it will be acknowledged that there are very few pure services,
in other words totally intangible offerings.
23
2.3 Characteristics of services

The inherent differences that exist between goods and services result in unique
management challenges for service organizations (Zeithaml and Bitner, 1996:18).
Services possess five unique characteristics; namely intangibility, perishability,
inseparability, variability, and lack of ownership, that differentiate them from goods.
These characteristics create distinctive challenges for service marketers in attracting
new customers, and keeping existing customers. These characteristics are explained
in the ensuing sections.

2.3.1 Intangibility

Intangibility is the dominant characteristic of services (Clemes, Mollenkopf and Burn,
2000:online) and is defined as the lack of tangible assets which can be seen,
touched or smelled prior to purchase (Kurtz and Clow, 1998:10). However, services
vary in the degree to which they are intangible and most services include some kind
of tangible element.

The tangibility spectrum (Figure 2.1) places highly tangible offerings at one end of the
continuum and intangible services on the opposite end of the continuum. It is clear
that very few offerings are totally tangible or intangible (Bebko, 2000: online).

The intangible characteristic of services present service marketers with several
problems. The lack of physical attributes of services makes it difficult to display or
24
communicate services readily and easily to customers (Hill and Ghandi, 1992:online).
Customers often find it mentally difficult to grasp the service performance or
experience without tangible evidence, which makes it difficult to diffuse (Zeithaml,
1991: online). Services that rely intensely on customer involvement, present cost
calculation difficulties that lead to price setting inadequacies for service marketers
(Dearden, 1978:online).

FIGURE 2.1: THE TANGIBILITY SPECTRUM
Tangible
Dominant
Intangible
Dominant
Salt
Soft Drinks
Detergents
Automobiles
Cosmetics
Advertising
Agencies
Airlines
Investment
Management
Consulting
Teaching
Fast-food
Outlets
Fast-food
Outlets
Source: Zeithaml, V.A. and Bitner, M.J. 2000 Services Marketing: integrating
customer focus across the firm. 2nd Edition. New York: McGraw-Hill, p 23.

Kurtz and Clow, (1998:11) indicate that these problems can, to a certain extent, be
successfully resolved by reducing the intangibility of service offerings through
stressing the tangibility components of offerings, stimulating word of mouth
communication, creating a strong corporate image, encouraging employees to
25
communicate with customers, and using unique attributable cost and perceived value
pricing. Service providers must always take into account the fact that customers use
the tangible elements, such as the people who provide the service, the environment
in which the service encounter takes place, the equipment used, and the price of the
offering, to make assumptions about the quality of the service and to compare it to
the offerings of other service providers.

2.3.2 Variability

Variability refers to the unwanted or random variable levels of service quality
customers receive when they support an organization (Kurtz and Clow, 1998:10).
The primary reason for variability is the human element present in the service
process, accordingly sustaining the statement of Kotler (1991:608) that the quality of
service depends on the service provider. Because humans normally perform
services, the chance of two service performances being the same is highly unlikely.
Different service employees will perform the same service process differently and the
same service employee will provide a varying service under different circumstances
or at different times. Nevertheless, the recipients of the service are also human, with
their own unique demands and expectations of the service performance.

Service marketers find it difficult to control the quality of the service performances
because it is dependant on fallible employees as one of the main inputs (Bitner and
Zeithaml, 1997: online). The reliance on peoples performances causes
standardisation service processes to be almost impossible. The intentional or
26
unintentional customisation of service processes and output performances by service
employees for individual customers makes promotion of services very difficult
(Clemes, Molenkopf and Burn,2000:online).

Customers in general perceive the person who delivers the service as the service.
As a result, service providers have the ability to alter the outcome and level of
customer satisfaction. Service marketers are confronted with the challenge of
controlling service quality because consistent quality service performances play a
vital role in the survival of organizations. Service quality is profoundly dependent on
the ability of customers to articulate their needs and level of service demands.
Equally, service quality depends on the ability, and willingness of the service provider
to satisfy customers needs and demands. Organizations can put into practice service
quality control and measurements by recruiting service-orientated employees and
training them to provide a service that will meet or exceed customers expectations.

2.3.3 Inseparability
Inseparability refers to the simultaneous production and consumption of a service
(Kurtz and Clow, 1998:10), thus it is often difficult to separate the service provider
from the service performance. Customers are normally present at and during the
service performance and play an active role in the service production process. The
quality of the service performance is dependent on the interaction between the
service provider and the customer.

27
The customers involvement in the production process of the service can influence
the outcome of the service positively or negatively (Hill and Ghandi, 1992:online).
Service marketers must recognize that the roles customers play in the service
production process influence the service outcome, not only for themselves but also
for other customers. The inter-client interaction between customers also plays an
integral part in the outcome of service experiences (Grnroos, 1978, Grove and Fisk,
1997: online). Service organizations must acknowledge the influential role that
service employees play in service processes. The service employees or the service
providers are often seen as the service itself (Wirtz and Bateson, 1995: online).

The inseparability of production and consumption means that very few service
offerings can be mass-produced, but almost every service offering can be
customised to customers needs and demands. Customisation is to the advantage of
service organizations, because customers use the degree of customisation of service
offerings to measure the quality of services.

2.3.4 Perishability

Perishability is the inability of a service to be inventoried or stored (Kurtz and Clow,
1998:10). This characteristic is of major concern to service marketers because it
inevitably leads to supply and demand problems. The capacity lost in services can
never be regained and to equalise supply and demand is a difficult task. These
distinct service problems present service marketers with the challenge of setting up
good recovery strategies for service process failures. Research has shown that
28
resolving customer problems effectively has a powerful impact on customer
satisfaction and loyalty. The perishability characteristic of services creates the
opportunity for the organization to develop creative planning for capacity utilisation
and management of future demand (Zeithaml and Bitner, 1996:21).

2.3.5 Ownership

Ownership is the last characteristic of services that distinguish it from goods.
Customers receive only the right to a service process when they purchase it.
Subsequently it is assumed that payment for services buys only the right of access to
a service and not physical transfer of ownership to customers.

Customers view the lack of ownership of a service as a perceived risk. Firstly they
are presented with the uncertainty as to whether the right service has been obtained
and secondly with the uncertainty about the consequences of the service purchase.
Since services are produced and consumed simultaneously, the option of returning
a service does not exist. The inability to own a service also has direct implications on
the distribution of services. Service customers usually only have use or access to a
facility where a service is performed.

Kotler (1991:609) suggests that services call for special marketing solutions. The
characteristics of services create problems for service marketers that are not
experienced by product marketers. If these problems are not carefully managed,
organizations may experience negative influences on service quality that will
29
ultimately reduce customer retention and organization profits (Wirtz and Bateson,
1995: online). In this regard, Zeithaml and Bitner (1996) have proposed a services
marketing triangle which will be discussed in the next section.

2.4 The services marketing triangle

Service marketers face marketing challenges which revolve around issues such as:
understanding customers needs and expectations of services,
making services tangible to customers and
keeping and dealing with promises made to the customers (Zeithaml and
Bitner, 1996:14).

The services marketing triangle shown in Figure 2.2 helps service marketers to
address these challenges. The three points of the service triangle represent the
organization, the customers, and the employees. Between each of the three points of
the triangle different marketing processes such as external marketing, interactive
marketing and internal marketing must be successfully carried out for service
processes to succeed and to build and maintain relationships with the internal and
external customers.
30
FIGURE 2.2: THE SERVICE MARKETING TRIANGLE
Internal
Marketing
Interactive Marketing
External
Marketing
Management
Customers Employees
enabling
promises
keeping promises
setting
promises

2.4.1 External marketing

The link between an organization and its customers is the external marketing
process. External marketing represents the promises which organizations make to
their customers with reference to products or services they offer. Organizations make
promises to customers concerning their offerings and how delivery of the offerings
will be conducted. The external communication activities of the service provider play
a key role in the formation of customers expectations, because their expectations are
affected by the service providers direct and indirect marketing messages (Kasper et
al., 1999:216).
31
In goods as well as services, the traditional marketing activities facilitate external
marketing processes. Promises made in advertisements and through promotions are
used by customers to form service expectations. These can also positively or
negatively influence the customers initial expectations of the desired level of service
compared to the adequate level of service. Customers use price as an indication of
the quality of the offering, while the promise of availability and accessibility of an
offering has an impact on the customers service expectations (Kurtz and Clow,
1998:76). However, for service organizations, factors such as service employees,
organization image and visible structures, and the actual service process itself, form
the basis for customers expectations of the offering and the delivery thereof.
Customers expectations and experiences fuse, therefore much of their final belief is
drawn from the environment in which they receive the service and the personalities
and behaviour of the people they encounter during service processes (Irons,
1997:14).

The organizations projected values and integrity must be the priorities that govern
the promises made to the customers during the external marketing process.
Customers expect consistent and realistic promises that will at all times be honoured
by the organization. Creating unrealistic customer expectations create dissatisfied
customers (Piercy, 1998:48). Misleading customers or over-promising to them can
negatively influence the relationship between the organization and the customer.

32
2.4.2 Interactive marketing

The interactive marketing process is about keeping the promises made by the
organization to the customer along with delivering a quality service to the customer.
Interactive marketing is the actual contact between the service employees and the
customers and is called the "moment of truth" or service encounter. It is the decisive
moment in the service process where organizations actually show what they can do
and how they meet the set expectations (Kasper et al., 1999:11). At these decisive
moments, everything about the service process can succeed or fail. The success or
failure can be temporary, complete, or final but the interaction can never be restaged
or controlled (Irons, 1997:46).

The marketing focus of service organizations has shifted from the offering to the
customers, to the interaction that takes place between the service employees and the
customers. Through their interactions with employees, customers form a perception
of the integrity of an organizations service promises. They furthermore use the
interaction to assess the value of the offering, and to make the decision to purchase
or repeat the purchase of an offering. From a customers point of view, this is the
most important stage of the service delivery process as it is during this process that
they receive the value they actually desire.

Interactive marketing performs a vital function in the establishment of a relationship
between the organization and the customer. The customers perception of the service
is derived from the delivery of the service, and cannot be separated from the contact
33
they experience with service employees. Therefore, it can be argued that
relationships are an inevitable outcome of service delivery. However, it is important
for organizations to acknowledge the fact that relationships do not necessarily exist
between the organization and the customer, but to a greater extent between the
service employees and customers. The success of these relationships depends
profoundly on the attitude service employees have towards their employment and
their loyalty towards the organization. It is the responsibility of the organization to
recruit service-orientated employees very carefully, involve them in organization
activities, and motivate them to follow the examples set by the leaders of the
organization (Irons, 1997:53).

During interaction, employees and customers meet face to face and the actions of
service employees will be a major factor in influencing the customers expectations of
the service. Customers evaluation of services is based on their interaction with
service employees, therefore it is of the utmost importance that service organizations
continuously strive to improve the quality of interactions (Sundaram, 2000:online).
Newton (1992) states that people forget how fast you performed a service but they
remember how well you did it. Service organizations must therefore ensure that their
service employees have the skills and ability to perform the service to meet the
customers expectations (Kurtz and Clow, 1998:117). The reliability of services is
tested every time a customer interacts with the employees and the service provider
whom they represent.

34
2.4.3 Internal marketing

The marketing process that enables service marketers to deliver promises to
customers is called internal marketing. Through internal marketing, the organization
reveals that it consists of individuals and departments who are considered to be each
others customers (Kasper et al., 1999:371). Employees do not only provide a service
to the external customers but also to each other within the organization. Promises are
easy to make, but unless organizations have internal systems in place to ensure the
delivery thereof, service processes cannot succeed. The success of internal service
systems is dependent on the relationship between the organization and the
employees (Kasper et al., 1999:371).

Internal marketing hinges on the assumption that employee satisfaction and
customer satisfaction are interlinked, thus internal marketing must precede external
marketing. Organizations whose objective is to deliver constant high service quality
have to enable all employees to practice customer orientation and marketing. Service
organizations must recognize that achieving objectives and creating change can only
be achieved through employees. Service providers need to recruit, train, and provide
tools to employees to perform superior service. Kasper et al., (1999:480) state that
people are valuable assets to an organization. They should therefore be fully
equipped to provide the best service to the external and internal customers.
Employees who understand their functions within the organization are more likely to
create a harmonious work environment that will pave the way for less role ambiguity,
less conflict, and more satisfied employees in the workplace.
35
The examples set by management for their employees are critical factors for the
success of the internal marketing process. There is a direct link between internal
marketing and the actual delivery of the service, because customers believe that
what you are is what matters not what you say.

The success of services relies on the three marketing activities to be carried out
successfully and to be aligned with each other. Each of the activities presents a
challenge and it is important to find strategies that support them all. Successful
external relationships will be repeated internally (Irons, 1997:98).

2.4.4 Technology and the service triangle

The impact of technology on all the dimensions of service delivery has brought about
the expansion of the service triangle to include technology. This expansion will turn
the triangle into a pyramid, as shown in Figure 2.3. This pyramid suggests that
interactive marketing can be the result of interactive relationships between
employees, customers, and technology to produce the desired services. Changes in
information technology offer opportunities to organizations to perform services in
such ways that the customers physical presence is not always compulsory.
However, when customers interact only with technology, they will need the skills,
abilities, and motivation to receive the service in this manner. The success of this will
depend entirely on the willingness of the customers to participate in a service process
without human interaction. Technology driven services may hinge upon introducing
more technology in service delivery processes that can either extend the service
36
process or shorten the actual delivery process. Technology can be used to create
new services, which enable organization to serve customers better and distinguish
themselves from their competitors (Zeithaml and Bitner, 2000:23).

FIGURE 2.3: THE SERVICE MARKETING TRIANGLE AND
TECHNOLOGY

Internal
Marketing
Interactive Marketing
External
Marketing
Management
Customers Employees
enabling
promises
keeping promises
setting
promises
Technology

A multitude of new service concepts has exploded onto the market because of the
advances of information-based technology. Fax, cellular phones, and electronic mail
are but a few of the technology-based services which have replaced traditional
services. The Internet has made it possible for customers to access services via their
computers and to some extent replace, and enhance the services of traditional
sellers. In all the above, marketing of the service has played an essential role in
37
educating customers about service concepts (Zeithaml and Bitner, 1996:9).
Educating customers and communicating the benefits of a service both present
continuing challenge for service marketers.

2.5 Services marketing mix

The traditional marketing mix is the most basic concept in marketing and is defined
as elements which organizations control and use to satisfy or communicate with
customers (Zeithaml and Bitner, 1996:23). The components of the traditional
marketing mix are the four Ps: product, price, place, and promotion. Careful
management of these components is essential for the successful marketing of goods
and services in both long-term and short-term marketing strategies of organizations.

Conversely, the traditional marketing mix components have been found to be too
limited in their application of services. The intangibility of service offerings is not
taken into consideration because the focus is on the tangibility of products. The price
component overlooks the fact that many services are produced without a price being
charged to the final customers, and customers frequently use price as an indication
of service quality. Equally, the simultaneous production and consumption of service
offerings make the distribution component difficult to implement and control. While
the promotion component of the traditional marketing mix concerns itself with
advertising, sales promotions and publicity, services marketing involves service
employees and customers in the real time marketing of services during the
38
interaction process. The limitations of the traditional marketing mix have lead to
exploitation by service marketers of additional components which services can utilise
to satisfy and communicate with customers, resulting in the adoption of the service
mix. The elements off this new concept are: service offerings (product), price,
distribution (place), promotions, people, physical evidence, and processes.

The three new components address the uniqueness of three of the service
characteristics. They focus, firstly, on the inseparability of service marketers from
customers, secondly, on the inability to hold service in inventory which makes it
critical for the service process to flow smoothly and lastly, on the fact that a highly
intangible service offering must appear tangible (Goncalves, 1998:37). The additional
components of the service mix can be fully controlled by the service organization and
play a vital role in ensuring that marketing is customer focused, not product focused
(Irons, 1997:24). The ensuing sections will provide a detailed description of the
service mix.

2.5.1 Service offerings (Product)

A product is anything that an organization offers to customers that might satisfy a
need, whether it is tangible or intangible (Palmer and Cole, 1995:15). In contrast, the
decisions that face service marketers concerning service offerings are very different
from those related to goods. An analysis of service offerings shows that it can be
divided it into two distinct components namely, a core service offering that represents
the intangible core benefits of services and a secondary service offering that
39
represents the tangible and augmented elements of the service offerings. The core
service offerings are developed with customers benefit in mind and place the
emphasis on the customers perception of services. The secondary service offerings
illustrate the additional benefits that the service offers to meet customers additional
needs, and serve to differentiate the offerings from those of competitors. These
benefits can combine both the tangible and intangible elements of service offerings
that facilitate the customer to comprehend the core service.

Because of its intangibility, services are difficult to control and display to customers.
Consequently, service marketers often emphasise the tangible elements of service
offerings. The more intangible a service, the greater is the need for tangible
evidence. Tangible evidence includes packaging, brand name, corporate image,
service delivery, and service employees.

2.5.2 Price

In the determination of price, service marketers deals very much with the same price
issues as goods marketers. Subsequently, the differences presents itself when the
intangible characteristic of services specifies that price becomes a quality indicator.
The art of successful pricing is to establish a price level that is low enough for the
exchange to represent good value to customers, but high enough to allow service
providers to achieve their financial objectives (Palmer and Cole, 1995:222). The
perishable nature of services makes it important to control the demand and supply of
the service offerings. The price component is the easiest to change and normally
40
provides the quickest results. Manipulation of the price can influence and control
quantity demand. An increase in price will reduce the demand and/or cause a shift to
lower usage periods. Equally, a decrease in price will cause an increase in demand
and stimulate new demand for the service (Kurtz and Clow, 1998:240).

The price of service offerings is often used by customers as an input into their
expectations, purchase decisions, and evaluation of service quality. It is seen as a
tangible cue in services with a high risk and experience properties, to form
expectations of the service. Price is used as an indicator of quality by customers.
Thus, the assumption is formed that the higher the price of service offerings, the
more is expected of it by customers.

2.5.3 Distribution (Place)

The distribution decision refers to the availability and accessibility of service offerings
to customers. Availability from the customers point of view signifies that services are
on hand when they want them, while accessibility is the relative ease with which
customers can conduct service processes with the service providers (Palmer,
1994:33). For pure services, the distribution decision is of little relevance, though
most services involve a tangible component. As a result, the distribution decision
involves physical locations and decisions which intermediaries use to provide the
services.

41
2.5.4 Promotions

The promotion mix for the traditional marketing mix is usually broken down into four
components namely advertising, sales promotions, public relations, and personal
selling. However, with the promotion of services, there is a greater need to
emphasise the tangible elements of services such as packaging, brand name,
corporate image, service delivery, and service employees (Palmer and Cole,
1995:16).

The distinctive promotional needs of services stem directly from some of the unique
characteristics of services. The intangibility characteristic of services results in
customers perceiving them as high-risk purchases, with a need for tangible
components as evidence of the service. The inseparability characteristic of services
emphasises the fact that the promotion of service offerings cannot be isolated from
service providers. Therefore, the visible production process, especially the part
played by service employees during interaction, is a critical element in the promotion
process. Berry (1989) states that the service promotion challenge is to transform
invisibility into visibility, vagueness into sharpness, uncertainty into evidence and risk
into benefit (Fugate, 1998: online).

The development of a promotional mix for services relies on the detailed specification
of promotion objectives to ensure that that appropriate messages are chosen and
effectively channelled in a cost effective manner to reach the target market. Typical
service promotional objectives are:
42
to develop an awareness or interest in the organization and its services
to communicate the benefits of purchasing a service
to build a positive image of the organization
to differentiate the organization from its competitors
to remind customers of the existence of the service and the service
organization (Palmer and Cole, 1995:260).

The services promotion mix uses a combination of channels to convey messages to
the target market. These messages are received from sources within the organization
and externally. External sources include word of mouth communications or press
editorials, while internal communications originate from the traditional marketing mix
and from the frontline employees. The combination of communication channels
depends on the characteristics of the target market, the size of the service, the nature
of the service and the cost of the various channels (Palmer and Cole, 1995:260). The
promotional mix of a service organization involves the transmission of messages to
past, present and future customers. The ultimate aim is to make future customers
aware of the service and influence them towards purchase.

2.5.5 People

People as an element in the service mix include all the human actors - the firms
employees (internal customers), the buyers (external customers), and other
customers - who play a part in service delivery and accordingly influence the buyers
43
perception of choice in the service environment (Zeithaml and Bitner, 1996:26).
Service employees interact with customers during service delivery processes and
provide cues to external customers concerning the services. Hence, it can be said
that service employees competence, attitude, and appearance influence customers
perception of services. Customers often experience service employees as
synonymous with the service and no matter how small or large a part they play in the
actual delivery of the service, they are still the focal point of the service for
customers. It is crucial that service organizations stipulate very specifically to their
employees what is expected of them during interactions with customers. To achieve
the desired standards of service, service organizations recruitment and training
cannot be left to the human resources department only, but should form an integral
part of the service mix decisions. Kheller believes that the heart of the organization is
the people and hiring the right people means hiring people with a service attitude
(Irons, 1997:139). Within successful service organizations, the human resources
department, and the marketing department work together to establish hiring criteria,
training needs, and promotion activities to attract and retain employees who can
deliver the quality service expected by the organizations target market.

The marketing department plays an important role in influencing the experience that
both internal customers and external customers will have. External customers choose
to visit a service organization because of the messages relayed through the service
mix, or word of mouth messages communicated by other customers. External
customers who encounter an unacceptable level of service from internal customers,
convey negative word of mouth messages about the service received to other
44
customers. Consequently, it is crucial that marketing departments and human
resources departments work together to ensure that the quality of service delivery by
internal customers leads to positive word of mouth messages to external customers
(Gonalves, 1998:38).

Every employee in an organization must serve other employees in some way or
another. Therefore, just as external customers are needed, so are quality employees
(internal customers) needed. The responsibility lies with service marketers to involve
all employees in the marketing process of an organization. A high level of employee
involvement and motivation is directly linked to an improvement in sales, profitability
and customer loyalty.

2.5.6 Processes

Processes are the actual procedures, mechanisms, and flow of activities by which
services are delivered (Zeithaml and Bitner, 1996, 21). Customers judge services on
the operational flow or on the actual delivery thereof. The inseparability characteristic
of services requires customers to follow a series of extensive or complicated actions
to complete the process. Often the logic of these actions escapes the customers.
Whether the service process is standardised or customised, it is used as evidence by
customers to judge service quality. Standardised services will follow a production-line
approach, while customised services command a greater degree of empowerment.
Nonetheless, the moment of truth where customers experience the evidence, is not a
once-off event but an ongoing process.
45
The main ingredients of services processes are the people who participate in it.
Services are of an integrated nature and the organizations employees continuously
fuse with the external customers. The production and consumption usually takes
place at the same time and research into customers attitudes towards service
organizations suggests that customers see a service as an integral process in which
they are intensely involved (Irons, 1997:37). The difference between service
processes and manufacturing processes are that:
the customers are participants in the service processes,
service processes are difficult to structure,
the outcome of services is dependent on internal and external factors,
the output of service processes leaves only promises and memories and
service processes play an integral part in customer satisfaction (Gonalves,
1998:39).

As a rule, services cannot be fixed to a definite time span, because depending on the
nature of the service, it can take anything from a moment to months to complete. A
service can be a well-defined process, where all participants are aware of the
process but a service can also be ill-defined or not obvious to the participant in the
process. Services that offer high degrees of customisation are usually ill-defined.
When service processes progress smoothly, they are hardly noticed by the
customers, who are under the assumption that the process will occur without any
problems every time it is performed. However, when the service process is not
completed successfully, both the internal and external customers are frustrated and
distrustful of the service organization. The success of service processes depends on
46
the loyalty and trust- relationships organizations can build with customers. Marketing
and the other organizational functions should work together to determine the needs
of the internal and external customers and satisfy those needs by designing and
refining effective and efficient customer-friendly service delivery processes
(Gonalves, 1997:41).

The actual service delivery process can be performed in three locations namely,
the customers environment,
at a store or an office or
electronically or via telecommunications.

Management have a great deal of control over the last two service delivery
processes.

A service can also be performed on customers, objects, and technological
equipment. Knowing this helps to understand the perceived risk for customers
attached to the service purchase. Service organizations must consider the
importance of communication strategies, appearance, skills, and attitude of service
employees. The physical evidence of delivery processes, such as the delivery
vehicles, print matter and delivery employees must also support a service
organizations image. The perishability characteristic of services influences the
service delivery process through the difficulty it presents in managing supply and
demand. Supply and demand cannot be readily adjusted but techniques such as
flexible service hours, price advantages for customers who buy during low demand
47
periods, special offers that can only be redeemed during slack time, and refinement
of delivery processes, can provide solutions to service organizations.

2.5.7 Physical evidence

The environment in which the service provider delivers the service and where the
customers and the organization interact, as well as any tangible component that
facilitates performance or communication of the service, is referred to as physical
evidence (Zeithaml and Bitner, 1996, 26). Service organizations need to provide
tangible evidence of the service to develop an image in the mind of current and
prospective customers. Often physical evidence overlaps with the promotion and
distribution mix of the service mix. All tangible representations of services, such as
brochures, letterheads, business cards, report formats, signage, equipment, and
physical facilities where service are rendered, represent the physical evidence of
services.

Physical evidence provides service organizations with excellent opportunities to send
strong, consistent, and positive messages regarding the nature of service offerings to
customers. Physical evidence is most successful if it is integrated throughout the
organization, meaning that it should be included in an organizations strategic
planning. Once it has been accepted by management, it is the responsibility of the
marketing department to implement it throughout the entire organization.

48
The more intangible a service is, the more it relies on physical evidence to convey an
appropriate message to customers. Physical evidence elements are employed to
reduce the level of perceived risk experienced by customers. Due to the intangibility
characteristic of services, it is hard to evaluate services in advance or to know the
outcome of service experiences. Customers are forever looking for tangible cues by
which to judge service quality. They tend to reduce the risk attached to the service
offering by comparing the physical evidence of services to the offerings of
competitors, use their previous experience as a framework, or rely on the opinion of
others. Extremely intangible services do not necessarily provide the greatest risk to
the customers. Only when a price is attached to service offerings, can customers
truly evaluate the risk attached to it.

The unique characteristics of services cause customers to search for evidence of the
service in each of their interactions with the organization. The new elements of the
service mix, namely people, process, and physical evidence, provide customers with
that evidence and allow them to form their own judgement.

2.6 Customers perception of services

Services are characterised by the interaction between service providers and
customers, therefore the quality and the capability of service providers have a direct
and significant effect on the delivery processes and customer satisfaction (Lau,
2000:online). Customers perceive services in terms of service quality, customer
49
satisfaction, and value (Zeithaml and Bitner, 1996:116). Dynamic service
organizations realize that these three components help to differentiate them from
their competitors and guarantee that they compete more effectively in the
marketplace.

2.6.1 Service quality

Service quality is a major factor contributing to customer satisfaction, however,
excellent service quality is a prerequisite to satisfy customers completely and create
customer loyalty (Kasper et al., 1999:139). Service quality is defined as the delivery
of excellent or superior service relative to customers expectations (Zeithaml and
Bitner, 1998:116). The basic principles that underlie the concept of service quality
indicate certain factors.
It is more difficult for customers to evaluate the quality of services than the
quality of goods.
Service quality is based on customers perception of the outcome of the
service and their evaluation of the process by which the service was
performed.
Service quality perceptions result from a comparison of what the customer
expected before the service and the perceived level of service received (Kurtz
and Clow, 1998:98).

Consequently, it can be said that service quality is used by customers to evaluate
service organizations, service processes and to differentiate between competing
50
services. Customers expectations play an essential role in the judgement of service
quality, therefore, a service that fails to meet the expectations of one customer might
satisfy another customer whose expectation level of the service was not as high. As
a result, it is important that service providers develop meaningful ways by which
customers can judge the quality of the service offerings.

2.6.1.1 Components of service quality

Grnroos (1984a) identified technical quality, functional quality, and corporate image
as significant components of service quality (Palmer, 1994:174).

Technical quality, or what is delivered to customers, refers to the relative quantifiable
aspect of services. It is an essential basis for judging quality because both the
customer and the service provider can determine whether or not the service was
performed correctly, on time and as promised.

The inseparability characteristic of services indicates that the outcome of service
processes is dependent on the interaction between service providers and customers.
Functional quality, or how a service is performed, is not objectively measurable, but
provides a clear indication of customers thoughts and feelings concerning the
service performance. The attitude of the employees, the appearance of the
employees and the atmosphere of the service environment will influence customers
perception of the service delivery. As a result, functional quality signifies the influence
which technical quality had on customers (Palmer, 1994:175).
51
Corporate image is based on both the technical quality and the functional quality of
services. It focuses on the actual service performance, the surroundings in which the
service was provided and the image conveyed by service providers. The focal point
of service organizations is to influence customers to remember the corporate image,
as organizations intend them to remember it (Palmer, 1994:175).

2.6.1.2 Dimensions of quality

Research has indicated that customers consider reliability, responsiveness,
assurance, empathy and tangibles as the five quality dimensions that apply
specifically to service organizations (Walker, Boyd and Larrch, 1995:263). These
dimensions reflect customers subjective judgement on the value they received from
services.

Reliability refers to the ability to perform the promised service dependably and
accurately. Organizations which honour their promises on service delivery,
service provision, problem resolution, and pricing are the preferred
organization to do business with, in the eyes of customers. According to
Zeithaml and Bitner,(1999:31) organizations need to be very aware of
customers expectations of reliability, since this is regarded as the most vital
determinant of the perception of service quality.

Responsiveness signifies the willingness of service providers to help
customers and provide them with prompt service. The dimension of
52
responsiveness requires organizations to handle complaints and problems that
result from a lack of enforcement of this dimension. Responsiveness is
communicated to customers by the length of time they have to wait for
assistance form the service employees, answers to questions and/or attention
to their problems. This dimension accentuates the necessity of flexibility and
ability within the organization to customise service delivery to customers
needs. Organizations which wish to excel in this dimension need to view
service delivery from the customers point of view and not that of the
organization. Standards for responsiveness need to be set according to
customers requirements because their notion of what constitutes speed and
promptness might be different from the organizations. The structuring of
service employees jobs, clear job descriptions and training form a firm basis
for responsiveness success (Zeithaml and Bitner, 1999:31).

Assurance is experienced in the employees knowledge, courtesy, and ability
to inspire trust and confidence. This dimension of quality is critical to
customers, especially if the service presents them with a high degree of risk.
Customers uncertainty about the outcome of services and their inability to
evaluate services increases the perceived risk. Service employees who
perform the actual services are responsible for instilling trust and loyalty in the
customer through the quality of the interaction. Recruiting and employing
personnel with a positive attitude towards quality is of the utmost importance
to service organizations. Their degree of friendliness, credibility,
trustworthiness, and competence will be reflected in customers' perception of
53
service quality (Sunduram, 2000:online). Service employees interact with
customers and their attitude toward quality is therefore very important.
Organizations can enforce the assurance dimension in the minds of the
customers by providing strong tangible evidence of the service, especially in
the early stages of the relationship (Walker et al., 1995:261).

Empathy stipulates the caring, individualised attention given to customers. The
essence of empathy is conveying, through personalised or customised
services, that customers are unique and special. Customers want to feel
understood by and important to organizations. Small organizations gain a
competitive advantage over large organizations through their ease in collecting
information about their customers personal issues, needs, and desires.
Subsequently this provides them with the opportunity to develop personalised
and customised services for individual customers.

Tangibles are the appearance of physical facilities, equipment, employees,
and written materials. Customers, especially new customers, use these
elements to evaluate the quality of services. Service organizations which
customers call on for a service should emphasise the tangible elements.
Tangibles are used to enhance the image of organizations, provide continuity,
and signal quality to customers. Most service organizations will combine the
tangible dimension with one or more of the other quality dimensions to create
a service strategy. Therefore, it can be argued that organizations which do not

54
incorporate the tangible dimension in their quality strategy can fail to develop a
good strategy.

Walker et al., (1995:263) argue that customers perceive all five dimensions of quality
to be key elements in their evaluation of service quality, regardless of the kind of
service being evaluated.

2.6.2 Customer satisfaction

Customer satisfaction is seen as a combination of service quality, product quality,
and price, in addition to the influences of situational and personal factors. While the
perception of service quality can be evaluated in the absence of the actual
experience. This is not possible with customer satisfaction. Customer satisfaction can
only be assessed after an experience with the service provider (Zeithaml and Bitner,
1996:124).

Because customers are more knowledgeable these days, they consistently tend to
seek out new services that will provide them with more satisfaction. As a result,
service providers are expected to increase the value of their service offerings to
customers to stop them from defecting to other organizations. Research on the
impact of customer satisfaction on customer loyalty concluded that customer
satisfaction influences purchase intentions and post-purchase attitudes.
Organizations must bear in mind that customer loyalty contributes an exceptionally
high portion of sales and profit growth within service organizations (Lau, 2000:online).
55
2.6.3 Perceived value

Zeithaml and Bitner (1997) define value as the customers overall assessment of the
utility of a product based on perceptions of what is received and what is given. Value
is therefore very closely tied to customers perception of price. Although customers
may perceive the quality of the service as good, and may be generally satisfied with
the service delivery, the value of the service in terms of money, time and effort may
not be of benefit to them. Often customers perceive the value of a service by
comparison with similar experiences or past experiences. Once again, the influence
of highly skilled and well-trained service employees, who perform service processes
efficiently and accurately, can positively influence customers perceived value of
service offerings.

Service quality, customer satisfaction, and service value are important components of
the success of a service organization. Customer satisfaction is the customers own
experience of the service and is accordingly evaluated in terms of the value that was
received by the customer. Value-orientated customers seek service quality that
exceeds the price and acquisition costs they incurred for the service. Customers who
believe they received a high service value and a quality offering from a service
provider are likely to display customer loyalty and are excellent sources of word of
mouth advertising (Lau, 2000:online). Ultimately, satisfied customers are the goal of
service organizations.

56
However, service employees constitute a very important component of service
offerings. In the next section the importance of service employees in the organization
will be discussed.

2.7 The service employees

Ogilvy once claimed that an organizations most valuable assets go down in the lift
each night (Irons, 1997:216). In the service environment service employees are
inevitably regarded by customers as:
the service organization and
the marketers of the service (Zeithaml and Bitner, 1996:304).

If employees are removed from the service picture service organizations are left with
very little means of gaining a competitive advantage.

The five dimensions of service quality discussed earlier are directly influenced by
service employees. Reliability of services is totally within the control of service
employees. They play a vital role in service recovery by determining the best options
to adopt in case of service failure or error. The willingness and promptness that
frontline employees display during the service interaction unequivocally influences
customers perception of responsiveness. Service employees ability to communicate
credibility and inspire trust and confidence refers to the assurance dimension of
service quality. This dimension is important, especially to new or unknown entrants
57
into the service environment. Empathy implies that employees will pay attention,
listen, adapt, and be flexible during the delivery of services. The tangible dimension
of service quality focuses on the appearance and dress of service employees. It is
also linked to other tangible aspects such as the service facilities, the service delivery
environment, and communication materials (Zeithaml and Bitner, 2003:321).

Zeithaml and Bitner (1997:304) indicate that it has been shown that happy
employees make for satisfied customers. Accordingly, satisfied customers reinforce
employees job satisfaction. Service organizations depend on the employees who
deliver the service for the success of service processes. To build a customer-
orientated, service-minded workforce, who will ensure quality service delivery,
organizations need to:
recruit the right employees,
train and develop employees to deliver service quality,
provide the needed support to employees and
retain employees who deliver satisfying service to customers.

2.7.1 Recruit the right employees

Recruitment is the way organizations secure their human resources. Therefore, the
focal point of recruitment should be to attract and retain the right employee for the
right job within the organization (Palmer, 1994:178). Traditionally recruitment has
been the function of personnel specialists in the human resources department.
Nevertheless, these days the focus is on integrated recruitment where the human
58
resources department and the department in need of an employee liase to procure
the best employee for the position.

Organizations must increasingly compete vigorously for the best people. They need
to identify the specific skills and abilities needed from the employees and
communicate these specifications to recruitment specialists. Well-defined job
descriptions ensure that the actual sourcing of possible employees, internally and
externally is made easier. Leather, (2001: online) pronounced: Hire carefully, so that
the people who come aboard fit your organization. Increasingly service
organizations aspire to hire employees for their service competencies and service
inclination. Service competencies refer to the skills and knowledge needed by the
employees to perform the job. Professional services, for example will validate
competencies according to degrees and qualifications, while in other service
industries competencies might relate to intelligence or physical requirements.
Employees should, however, be screened for their service inclinations, implying their
attitude toward a service job. Research has shown that service effectiveness is
directly linked to a service-orientated personality, with qualities such as helpfulness,
thoughtfulness, and social inclinations (Zeithaml and Bitner, 1996:314). An ideal
service employee will be one who scores high on all of these features.

2.7.2 Train and develop employees

Organizations which wish to grow and maintain their workforces ought to train and
develop their employees to deliver quality service. Training and development are
59
essential elements in ensuring the effective and profitable performance of
employees. Through training, employees acquire specific knowledge and skills to
ensure that they perform their jobs more effectively. Service employees need
ongoing training in technical as well as interactive skills. Technical skills training
refers to the familiarisation and training of employees with equipment and standard
routines. Usually this training is done as on the job training. Interactive skills training
are more complex and focus on teaching employees problem solving, communication
and interpersonal skills. Technical and interactive skills training programmes should
not be limited to frontline employees, but should be conducted for managers and
back office staff too. After all, training should be an ongoing process, throughout the
whole organization.

Organizations which wish to initiate change will find that it more acceptable to
employees if it is accompanied by training. Through training, employees can be made
aware off future changes that may occur to ensure that the organization competes
successfully in the market place. They will also be given the opportunity to
experience first hand the pressure from the external environment that organizations
experience to change,

In service organizations, marketing is integrated into the job of every employee,
making every employee a part-time marketer of the organization. With the aid of good
training programmes, every part-time marketer should be made aware of the
behaviour and specific tasks that are expected from them to allow them to meet or
exceed customer expectations.
60
2.7.3 Provide support

Without customer focused internal support systems, it is impossible for service
employees to deliver a quality service. Organizations can encourage supportive
internal services by measuring and rewarding them. Organizations which
acknowledge that internal service quality exists will succeed in developing an internal
quality culture.

Service employees must be provided with the right equipment in order for them to
deliver a quality service. Internal processes should also be designed with customer
satisfaction in mind. Thus, it can be said that the internal procedures will support
quality service performances. Many organizations internal processes are driven by
tradition, therefore this can be the most difficult change strategy to implement.

Organizations realize that in order to be truly responsive to customers needs they
have to empower employees to accommodate customers requests and rectify errors
in cases of service failures. Grnroos (1990) argues that front-line employees should
ideally have the authority to make prompt decisions (Rafiq, 1998: online).
Empowerment gives employees the desire, skills, tools, and authority to serve
customers (Zeithaml and Bitner, 1996:319). It leads to quicker response by
employees to the needs of customers and in situations where customers needs are
very variable, it allows employees to customise service delivery (Rafiq, 1998: online).
However, it is not enough to give employees the authority to make decisions; it is vital
that they have the knowledge and tools to make those decisions. Empowerment
61
encourages people to think and make decisions about what they do best. After job
changes Shumate (Rosenfeld, 1999: online) suggests that it is not the job change
that makes the difference but the amount of voice given to the employee in the
decision- making process. Organizations should always support the decisions made
by empowered employees in order to show support for empowerment.

The nature of service jobs suggests that customer satisfaction is enhanced if service
employees work in teams. Because service jobs are demanding, frustrating and
challenging, a team environment provides support to help relieve some of the stress
and strains that service workers experience. Teams add variety, challenge and
encouragement to service performers during stressful times.

2.7.4 Retain employees

Once an organization has hired the right employees, trained and developed them
and provided the needed support, it is important that they retain them. It is very
discouraging to customer satisfaction, employee morale, and service quality if service
organizations experience a high staff turnover.

The recruitment and retention of employees is directly influenced by the quality of the
reward offered. Peters states: An organization should be a cool place to work for.
And it doesnt hurt if the money is good, and it doesnt hurt in the least if they have a
gym and day-care (Rosner, 2000:online). The purpose of reward is to provide
employees with something they consider of value in return for their performance. The
62
value of the reward is influenced by the nature of each individual employees
contribution, therefore it can be argued that a standardised reward system does not
provide maximum motivation among individual employees.

Reward can be divided into two categories namely, monetary and non-monetary
rewards. Monetary reward is directly used to improve employee performances and
act as a principal motivator. Basic hourly wages, fixed salary, annual bonuses, and
profit sharing are usually stipulated in the employees contract with the organization.
Non-monetary reward can be in the form of subsidies, special facilities, or public
recognition for work performance. These rewards are seen as the root of the
employee-employer relationship. It is not about the reward but about employees
knowledge that in giving a reward the organization shows interest in employees well-
being. Mueller alleged: We thought that if we create a place where people like to
work, wed achieve our goals (Rosenfeld, 1999: online).

Service reward should be linked to the vision of the organization. Leather (2001:
online) states: Forward thinking companies will have a distinct and focused vision.
Secure employees will not only identify with that vision, but also prescribe to
company values. An employer of choice will weave its employees into its business
plans and build a compelling work place. Employees who are included in their
organizations vision have a clearer understanding of the organizations goals.
Therefore, they remain more motivated in their jobs, because they know how they fit
into the bigger picture. Organizations should emphasise to their employees that it is

63
not always the major accomplishments that contribute to the success of the
organization, but rather the everyday performances.

2.8 Summary

Services have become an integral part of the world economy. Over the past decade
the role of services marketing has become a dominant feature in the service industry.
The continuous shift to an information society lead to an increase in service demand
from customers, meaning that organizations no longer regard services as an option
but rather as a necessity to gain a competitive advantage.

A broad definition of services implies that it is originally intangible and relatively
quickly perishable activities whose buying takes place in a process of interaction
aimed at creating customer satisfaction, but during this interactive consumption it
does not always lead to material possession.

Services have five unique characteristics that are not founds in goods, namely
intangibility, inseparability, variability, perishability and ownership. The intangibility
characteristic of services seems to be the dominant one in the definition of services.
These unique characteristics create numerous challenges for service marketers to
attract new customers and retain current customers.

64
The service marketing triangle and the service mix are but two concepts used to
address the challenges of service marketing. The service marketing triangle focus on
three marketing processes that need to be successfully carried out to ensure service
success. Firstly, external marketing takes place between the organization and the
customers and represents the service promises the organization makes to
customers. Secondly, interactive marketing implies the actual contact between
service employees and customers and represent the fulfilment of the promise made
by the organization. Thirdly, internal marketing enables the service marketer to
deliver promises made to customers and is the result of interaction between the
organization and its employees.

The service mix concept has been developed because of the limitation of the
traditional marketing mix components in their application to services. The
components of the service mix are; service offerings, price, distribution, promotions,
people, process and physical evidence. The three new components of the service
mix, i.e., people, process and physical evidence, have the advantage that they can
be fully controlled by the organization.

The success of services relies on the success of the interaction between service
providers and customers. Customers perceive services in terms of service quality,
customer satisfaction and value. Very few organizations have succeeded without
taking customer needs into consideration. Individual customers have individual
expectations of services. From the customers point of view the interaction with the
service provider is the most vivid impression they have of the service quality,
65
therefore the initial interaction of customers with the service employees can be critical
for the organization in any repeat purchase and in achieving a reputation for superior
quality.

Customers consider reliability, responsiveness, assurance, empathy, and tangibles
as the most essential dimensions in their assessment of service quality. Customer
satisfaction includes service quality, product quality, and price. Customer satisfaction
cannot be determined without an actual experience with the organization. The
customers perception of value relates to the benefits received from the offering in
term of money, time, and effort.

Service organizations are dependent on service employees and it is, therefore,
imperative that they recruit, train, support and retain good service employees.
Service employees must have the skills, abilities, and attitude to provide customers
with quality service.

Service organizations realize the importance of the role that service employees play
in the success of the service process. Therefore, it is important that they understand
the value employees add to an organization. This concept will be discussed in full in
Chapter three.

Services Marketing

Hochgeladen von

Dokumentinformationen

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Services Marketing

Hochgeladen von

Copyright:

Verfügbare Formate

CHAPTER 2

INTRODUCTION TO SERVICES MARKETING

Das könnte Ihnen auch gefallen